Walnut Creek, Calif.—The U.S. economy is experiencing a slow, steady expansion in spite of recurrent headwinds, Marcus & Millichap reports in its mid-year apartment market outlook. Expansion is being led by a substantial comeback in housing, resilient consumer spending, a broad-based rally in private sector employment and ongoing growth in the energy and technology sectors.

“The key takeaway here is that the U.S. apartment market remains in good shape as we enter the second half of the year,” Hessam Nadji, Marcus & Millichap managing director of research and advisory services, tells MHN.

“New construction is not out of control yet, and continued strong renter demand will see the national vacancy rate dip to five percent by the end of the year.”

Despite higher payroll taxes and the impact of sequestration, greater discretionary income has resulted in sustained consumer spending. But weakening global demand has impacted the industrial sector, and especially manufacturing, where two months of declining output have been registered.

At the same time, job growth has remained steady but not exceptional nationwide. Private-sector payrolls grew by nearly 180,000 positions in May, bringing the annual gains to 2.2 million jobs. The net gain was approximately 2.1 million jobs, once the loss of 58,000 government jobs is factored into the total.

Initial unemployment claims are at five-year lows, while the jobless rate has seen improvement of 60 basis points to 7.6 percent.

Also noteworthy is that sales of existing homes have returned to long-term trends. Those sales neared an annualized 4.97 million units in March, which resulted in a 24 percent drop in inventory to 4.7 months, measured by the pace of current sales. Buoyed by fewer distress sales, smaller inventories and an increasingly competitive selling environment, median sales prices grew by 11 percent to $195,900. Permitting for five units or more surged almost 55 percent to a seasonally adjusted annualized 374,000 units.

Finally, core retail sales, excluding automobiles and gasoline, are 3.5 percent higher on an annualized basis. Retail sales posted gains almost across the board, with the only exceptions being department stores and electronic and appliance stores, which registered 2 and 2.4 percent drops respectively.

As for forecasts of the near future, the Marcus & Millichap report notes that the pace of economic expansion is sufficiently strong to bring about steady demand for commercial real estate and a recovery in property operations. At the same time, it’s low enough to keep inflation in check and interest rates low.

“One of he key barometers of the apartment industry is the movement of demographic trends,” Nadji says. “So owners should focus on the pace of the economic expansion, and its impact on the rate of home ownership as it relates to echo-boomer household formations.”